Hyper Inflation in Australian Strata Insurance

Almost exactly 12 months ago Cyclone Yasi caused serious damage in the northern parts of Australia affecting many strata buildings in Norh Queensland, Darwin and North Western Australia.


But even though the rubble and mess has been cleared away, the impacts continue to be felt by strata owners in relation to insurance coverage and premiums.


You see, since Cyclone Yasi strata insurers have either refused to offer insurance, increased deductibles and/or increased premiums.  


Take the example of Plantation Lodge near Port Hinchinbrook reported by Nine MSN.  Although it was only a block from the marina where boats were trashed by the category 5 storm the 18 strata apartments experienced only minor damage like dented garage doors, aluminium windows and damaged satellite dishes.  But it's insurance premium has risen dramatically.  In 2009 they paid $8,000 PA, in 2010 they paid $12,740 but in 2011 they have had to pay $47,189 (a 400% increase).


That's pretty significant (especially since insurance represents a significant budget item for strata corporations).  It's made worse by the fact that whilst the insurance needs to cover the cost of rebuilding the strata complex (estimated at $7 million) the market value of the apartments has fallen so that they are not collectively worth that much.


Plantation Lodge is not alone and as I blogged about before there's a lot of interest in and discussion about strata insurance for natural disasters (see Blog Australian Government Checks Strata Insurance).   


There's no easy answer since the insurance is necessary, the risk exposure is high and other strata owners shouldn't have to subsidise higher risk locations.  So, it may be that a mixture of insurance concession options and government minimum protections may need to be offered to make it work.  What do you think?


Either way everyone involved in Australian strata insurance is watching this debate with great interest.


Francesco ...